Semi-retired and living off property – Bryan Loughnan

Kevin: Sometimes some of the best lessons we can learn in life are lessons from the journeys of others. It certainly saves us a lot of angst and a lot of pain along the way. I’m going to tell you about a success story now.

A young couple in their mid-30s, already well on their way to becoming semi-retired because of some very smart investments. They worked with a buyer’s agent by the name of Bryan Loughnan. Bryan is from Propertyology.

Good day, Bryan. How are you doing?

Bryan: Hi, Kevin. Well. Thanks for having me.

Kevin: Good, mate. Thank you for sharing this story with us. Tell us a little bit about this couple.

Bryan: So, Jess and Belinda are a young couple. They came to us about two and a half years ago now. Both of them earned properties in their own right prior to getting together. And now they’re looking to continue their investment journey.

They had a lot of capacity – probably the ability to buy a $700,000 or $800,000 property given the equity they had and some cash flow that they had from other properties – but understood the importance of minimizing risk as they were growing a portfolio and reached out to us to get some of our experience and help them invest.

Kevin: Tell us about the journey that you took them on, because I think when they came to you they already had some property in their portfolio.

Bryan: Yes, absolutely. They came to us and said they probably had the capacity to buy a property up to $700,000 or $800,000 but they weren’t keen to buy one property; they wanted to make money.

As investors, we all want to make money, but we need to understand that minimizing risk in that journey is important as well. Key for us in minimizing risk is in diversification. Whether you are a share investor or a property investor, you should be looking to diversify.

They came to us. They had two properties. Since then, we’ve actually helped them buy two other properties, so rather than buying one property in one location for $700,000, they split that down the middle and they managed to secure two really good properties in two completely different locations.

Kevin: How were you able to help them? Obviously, it was sitting down with them and analyzing with them on where they need to go.

Bryan: So, a little bit about what’s the existing portfolio? That was important. So, where are their existing properties, and what are the industries that drive the economy in those particular locations? So, understanding that one of their properties was on the Sunshine Coast, so very tourism-dominated, and the other one was on the north coast of New South Wales. Already very different locations, but helping them to continue to build their portfolio into yet another state, another completely different location, and a really exciting location for them.

Kevin: What are some of the lessons that you would tell aspiring young investors from the experience that you picked up with this couple? What are some of the lessons that they can learn from?

Bryan: Jess and Belinda are extremely great savers, and I know that not everyone in their late 20s and early 30s can be fantastic savers; everyone has to enjoy life. But they really worked hard and understood that by putting that money away early, they were really going to be able to set themselves up for their future, continuing to diversify their portfolio, and build a portfolio that wasn’t just based on one property or one asset class.

They’re now in their mid-30s. They call themselves semi-retired. They’re two years traveling around Australia at the moment, and they’re only in their mid-30s.

Kevin: Bryan, before I let you go, mate, obviously buyer’s agents are becoming more and more accepted in the Australian property investment market. How should someone prepare themselves before they come to see you?

Bryan: The first thing I’d say is pick up a phone and speak to a buyer’s agent. Don’t be afraid. Don’t think you have to have everything ready to go at that time. Pick up the phone. At least open communications.

At Propertyology, we’re very strict on we need a pre-approval in place before we actually start the search for property. It’s a hectic time buying a property, so making sure you have all your ducks in a line before you start is important. From a negotiation’s perspective, it’s really powerful for me as well.

I would certainly say, don’t put it off. I encourage people to look. If they are looking to invest or are interested in their future, pick up the phone and give a buyer’s agent a call.

Kevin: Good idea. Bryan Loughnan is a buyer’s agent. He’s with Propertyology. And we thank him for his time. Thanks Bryan. Talk to you again soon.

Bryan: Thanks Kevin.

Advice to help you get ahead – Chris Gray

Kevin: I have a question we’ll answer now from Mark. Mark sent this in during the week: “I’m struggling to get a start at property investing. I’ve been saving like mad, and I have $15,000 ready to go – not enough. I don’t seem to be able to get ahead. My sister and her boyfriend are in a similar position. Together, we have $40,000 saved, or will have early next year. We want to buy something together. Any advice?”

Mark, probably tons of advice. I’m going to turn to Chris Gray, who is a buyer’s agent, also a host of Your Property Empire on Sky News Business every Monday at 9:00 from YourEmpire.com.au.

Chris, thanks for joining me.

Chris: My pleasure. Thanks for having me.

Kevin: Let’s see if we can tackle this for Mark. What would be your advice?

Chris: It’s tough for young people these days. You need such a large amount of money to get in. But on the positive side, it’s so much easier now than I reckon it was 20 years ago, because we have so much education, the market is more sophisticated. So, if people are thinking it’s tough, look, it was actually tougher before.

But I have a few thoughts for him. One of the great things that I’m a fan of is LMI, which stands for lender’s mortgage insurance. Basically, what that means is if you want to borrow more than 80%, the banks are going to charge you a premium, like an insurance policy. It doesn’t cover you, it actually covers them, but it basically means that you might be able to get away with a 5% deposit rather than the normal 20%.

Now, a classic bank or mortgage broker will say, “No, don’t spend that because it could cost you another $10,000 or $20,000,” but in my mind, if you can get into the market one or two years earlier, or you can buy yourself a $500,000 or $600,000 property rather than $200,000 or $300,000 property, sure, it might cost us $10,000 or $20,000 but you might make $30,000 or $40,000 off the back. So, I think it’s not a false economy spending that; it’s actually a really good economy.

Kevin: That’s good advice, because that could be the difference between getting into the market and not getting in, Chris.

Chris: It is. It makes the biggest difference. We actually covered this at the Property Expo fairly recently, and it’s not really the difference between maybe buying in at $500,000 now or at $600,000 in a few years’ time, it’s actually in 30 years’ time when you’ve had an extra couple of years and it’s almost the $2 million then going to $3 million that makes a difference, not the $500,000 to $600,000.

Kevin: What a great piece of advice.

Chris: I think property investing is all about time in the market. So, as long as you can be in for 20 years rather than 15, that’s where the money is rather than trying to time the ups and downs.

Kevin: What else would you say to Mark?

Chris: One of the other things – I think Joe Hockey said this and I don’t think it went down well – is go and get another job, and even get four or five jobs. There are plenty of property experts out there who have done multiple jobs in their time. You don’t have to do it for the rest of your life, but it’s a bit of a sacrifice.

If you want to get that property, sure, do another two or three jobs. It’s not going to be great – you’re going to have to miss out on drinking down at the pub with your mates – but in the years to come, then it’s going to be worth it.

My story is I worked twice as hard in my 20s to 30s, and then pretty much from my 30s and 40s on, I’ve had a pretty relaxed life because I sacrificed so much in the early days.

Some other great ones: parents’ equity. I got a parental guarantee when I was a lot younger. It’s not a handout; it’s them really just guaranteeing that you can make the higher mortgage repayments and having it as a backup. That doesn’t even cost you or your parents any money.

Then the other thing is to look for other co-workers. He already said he could maybe join a partnership with his sister and boyfriend; they haven’t got too much money, but they have a bit. But maybe there are some other people you work with who have maybe got a big deposit but maybe they haven’t got an income, or they haven’t got an ability to go and search for the property and do all the renovations or something.

Joint ventures is all about looking at what you have and then seeing what you’re missing, and trying to find someone who has the opposite – that they have what you want but they haven’t got the opportunity to maybe go look at the properties.

Kevin: Yes, so doing it as a bit of a team. What are some of the cautions with joining in with someone like that, Chris?

Chris: I’m always a fan of “If you can do it 100% yourself, do it yourself.” Don’t do a joint venture on purpose, because then you’re reliant on someone else and they can let you down. So, when you are going to do one – I still think it’s better to have half a property than no property – look for the worst case situation and then work out what you do in that. And the worst-case scenario is you’re not speaking to the other person, you’re the other side of the world.

When I did one of these, I said, “Okay, let’s assume that if we’re not getting on after seven years – i.e. one property cycle – we sell the property. This is how we split the revenue and the capital gains and things like that.”

Kevin: So you set up an exit strategy right at the start.

Chris: Exactly. Even if it’s with mom and dad or with brother and sister, you always do it. You always look at the worst-case scenario.

And then probably the final one, which is a fairly new thing in Australia, is fractional ownership. There are two or three companies that are doing it. There’s DomaCom, BRICKX, and there’s a new one, Covestor, coming out.

These are basically platforms, and their philosophy is say you only have $50,000 and you want to buy in Australia; you’re going to have to buy hundreds if not thousands of kilometers from the capital cities. So, rather than have a dump way out in the middle of nowhere, why not buy 10% of a $500,000 property, or 5% of a $1 million blue-chip property?

The downside of this is no real leverage in it at the moment, so your $50,000 only gets you $50,000 worth of the property, but there might be some leverage later on.

I’m a big fan of this. Maybe some people have maybe $50,000 or $100,000 in super, they’re not really into the share market; I’d rather have 10% of a Bondi $1 million unit than maybe a $100,000 worth of shares.

Kevin: What were those companies that you mentioned with fractional ownership?

Chris: DomaCom, BRICKX, and there’s a new one called Covestor. I think we’ll see more and more of these coming out over time. One of their arguments is to say that if you had $1 million, you’d never put $1 million into one share, so why would you put it into one property? Why not diversify it out a bit?

Kevin: Yes, we’ve spoken to BRICKX, and it is a bit like the stock market, isn’t it? It makes a lot of sense.

Chris: Yes. And look, you still have to find the right properties on those portals. There’s no guarantee that you’re going to be able to sell your percentage straight away, because obviously, there are going to be some costs with that. So it’s not a perfect scenario, but at least it’s a stepping stone.

For a lot of young people, you can’t buy that ideal property in the best location when you’re in your 20s. So, you just need to get into the market or save some money or get into some shares. Do something just to keep yourself moving ahead.

Kevin: And continue to save at the same time. I guess the bottom line here, Chris, the thing that I’m hearing from you is that there are options. It’s never been easy, but it’s probably getting easier. And if you use things like lender’s mortgage insurance, as you suggested, and continue to make those sacrifices, do it now while you’re young.

Chris: Exactly, because it doesn’t get any easier. And when you’re young, you want to go down the pub, you want to go traveling, you want to have the phones and the cars and all that kind of stuff, but there are lots of people who have sacrificed in their 20s and it really does set you up for later in life.

Kevin: Yes, it’s finding likeminded people, too. I guess in a way Mark is a bit fortunate here because I think he said his sister and her boyfriend obviously have a similar mindset, so they’d be the perfect people to do this with.

Chris: It is. And there’s so much information out there, from the TV shows to these kinds of podcasts as well. Sure, it’s still tough to go and get those extra jobs and get the money, but at least you have the knowledge now, whereas we didn’t have that 20 years ago.

Kevin: All good, Chris. Just very quickly before I let you go, how are you feeling about the property market as we enter into 2018?

Chris: Again, it always depends on where you’re invested, but the kind of things that I’m after – which we’ve talked about a lot, the blue chip, inner city, medium price thing – there are a lot less buyers in the market but there are still no properties there. So, we’re still seeing that there are people queuing up for auction.

There was one in Coogee the other day. Someone saw it almost sight unseen the day before and spent $200,000 over, and the property didn’t even have parking. So, people are still uneducated, there’s still massive demand, and so I think prices are going to be steady in that medium-price, inner city-type market. In other parts of Australia, it’s very much dependent on the price point and exactly where it is.

But I still think things are positive. We have low interest rates, there’s still nots of demand, there’s no blood in the streets, so I think things are still going good.

Kevin: Chris, all the best for the festive season. I look forward to talking to you during 2018. You can catch Chris’s great show, it’s on Sky News Business every Monday at 9:00 pm. It’s called Your Property Empire. Or you can contact him through his website, YourEmpire.com.au.

Chris Gray, thank you for your time.

Chris: Many thanks.

What is Blockchain – Graham Cook

Kevin: It’s certainly been a hotly debated topic within the finance world, but Australia’s most respected experts and economists believe that Blockchain will be widely adopted in the near future. What is blockchain?

I have to admit to you that I know very little about this, and I’m looking forward to finding out a little bit more, especially if it is going to impact us. And I want to know where it’s going to fit in for consumers as well. To help me understand this, I’m joined by Graham Cook, who is Insights Manager for Finder.com.

Graham, thanks for your time.

Graham: Good day, Kevin. How are you doing?

Kevin: Wonderful, mate. I have to confess, I do not understand much about Blockchain, so firstly, you might want to tell me what it is and how it works.

Graham: Blockchain basically is the system behind these cryptocurrencies you may have heard of, the likes of Bitcoin. There are other ones, but Bitcoin is the main one that people talk about. It’s a currency people can exchange from one to the other to pay for goods and transactions.

The system that backs it up is called Blockchain, and Blockchain is basically a way of sending assets securely from one person to another online. Before Blockchain came around, there was this thing called the double sending problem where when the records were stored in one place but consulted somewhere else, you could say you’re sending money to one person, but that record could be altered to say you’re sending money to somebody else, and it wasn’t very secure.

Blockchain solves that problem by basically setting up a system where if you say, “I’m going to send Alice five Bitcoins,” you announce that to the whole world at the same time, basically, and the agreement to send five Bitcoins to Alice is recorded simultaneously on millions of computers all across the world, and all the transactions are recorded continuously.

And then blocks of them, bunches of them are gathered together in these things called blocks, which are encoded, and each block is linked to the previous block in the chain. Basically, the Blockchain is the continuous record of every transaction that has happened between everybody in the Blockchain, all the way back to the very first block.

Kevin: Wind the clock back a little bit, because I am struggling to keep up here. We’re talking about things like cryptocurrency and Bitcoins. I have to tell you that I’ve always seen that as almost like a bubble or a false thing or something that wasn’t real. But I’m hearing more and more about Bitcoins. Are they increasing in value? Are they risky?

Graham: Oh, massively. I had to write a blog piece here about six months ago about Bitcoin, and the commentary at the time was that Bitcoin has increased in five years from $10 or $12 per coin to about $2000 per coin at that time. Since I wrote that blog, it has now gone up. I think last week, it hit $10,000 per Bitcoin. So yes, the value is definitely increasing in that particular currency.

And the reason is the supply of Bitcoin is limited. It’s not like a normal currency where a government can print more. So, there’s a limited supply, and the value is going up. People are seeing it as an increasing way people are going to transact in the future.

Kevin: Why is there control over the amount of Bitcoin there is? Who is behind it?

Graham: This is an interesting thing, because the Blockchain concept, the concept of a distributed record of transactions is just a concept, really, and there are multiple different Blockchains, multiple chains of records.

The one behind Bitcoin was invented by a guy called Satoshi Nakamoto. We don’t know who that person actually is; we just know the name. The theory is that he’s a Japanese computer scientist or cryptologist, and that’s the person who came up with the system and mined the first block.

From there, the Blockchain grew. More computers got on board recording and analyzing transactions to build the Blockchain, because if you become part of the Blockchain community, you get Bitcoins back. So, it’s grown from there.

But there’s not just that one Blockchain; there are other ones as well. For example, there is one called Ethereum, which is a Blockchain designed not to monitor transaction of currencies but to monitor contracts and agreements. There is one, for example, being used in some third-world countries to monitor agreements for land titles and property.

So, if I sell my house to David, for example, there’s not just one printed record of that transaction; the transaction is recorded in a Blockchains, so everybody knows and has a permanent record that I sold the house to David. And if somebody comes and disputes that in future or if a dictator comes in, for example, and decides that all land now suddenly belongs to him, there’s a record that everybody has that’s unhackable that everybody agrees that David now owns that land.

So, there are multiple applications beyond just finance.

Kevin: I guess as we get more and more online, it seems like all of this is going online, becoming totally paperless. Should we be concerned about cybersecurity?

Graham: The Blockchain will actually make the traditional cybersecurity whereby you’re worried people are going to hack into your account and fraudulent transactions and stuff less likely, because the Blockchain is unhackable.

Essentially, if you want to go into a block, a record of transactions, and change it and say, “Dave didn’t give me 5 Bitcoins; Dave gave me 5000 Bitcoins,” you’ll need to hack into that block not on one computer but on all the computers that it’s recorded on – so millions of them – all at the same time, and you won’t be able to get into it without also hacking into the previous block and the previous block. So, as it continues on, it becomes more secure. So, the Blockchain is secure.

What we will need to worry about ongoing, though, is more identity theft. Your Blockchain is just like your bank account in a way. If you have a name and an ID to log into it, if somebody can gather that information, they can theoretically get into your Bitcoin account, just as they can your bank account.

So, identity theft is the real worry going forward. You really need to monitor your passwords, your Facebook passwords, your e-mail passwords, and such, and change them regularly to make sure nobody else can get into your account.

Kevin: As I understand it, Blockchain really isn’t a business where you have a structure, someone owns it, someone is making money out of it. Blockchain is something that was invented, it’s now publicly used, so it’s more like a tool. Am I understanding that?

Graham: Yes, it’s basically a distributed ledger of assets. That could be financial assets, that could be contracts, that could be paying people directly.

One of the other ways the Blockchain as a system is becoming useful is with these things called remittances. If you look at third-world countries and countries like India for example, more money is flowing into those countries from people who have left those countries to move overseas to – for want of a better word – richer countries or countries where they can earn more money, and they’re sending money back to their family. More money flows into third world via these remittances than via all of government aid across the world.

And at the moment, the only asset these people have to send money home is money transfer agencies that you see in post and offices, banks. The problem with those is they’re very expensive. They can charge 10% to send the money home. It could take five days to get there. Your family who’s at home doesn’t know when it’s going to arrive.

There’s another Blockchain app called Abra that exists at the moment where people can send currencies to any country in the world. Say their parents don’t have a computer. They can send to a dealer where the parents are. They can go collect the money from that person. It’s instantaneous, and it charges about 2%. So, it’s going to stop people being ripped off sending money overseas.

Blockchain is the concept of this ubiquitous record of transactions, which is unhackable.

Kevin: You mentioned about Bitcoin or it might have been Blockchain being used – I could be getting confused here – for property transactions or land transactions. Do you see a day when things like Bitcoins or cryptocurrency or whatever could be fully responsible for how we transact in property?

Graham: Yes, absolutely. Something governments are already trying to develop is changing the whole record of property ownership and property transactions into a Blockchain. So, every single property transaction – you give a property to someone and they sell it to somebody else – that whole chain of interaction is recorded, as is every other property sale and resale simultaneously. So, everybody knows that this house is owned by X person and nobody can disagree with it.

Yes, there definitely is movement, especially in countries where previously, records wouldn’t have been as well kept – some third-world countries, for example – to move all these property transactions to a Blockchain so that everybody can agree who owns what at any given point in time.

Kevin: I think I’m beginning to understand, Graham, thank you. Maybe it’s my age, I don’t know, but I’m struggling to keep up with what’s happening with things like Blockchain. Thank you for giving us your time and that insight.

Graham Cook is the Insights Manager for Finder.com, probably one of the hardest jobs in Australia, having to understand things like this.

Graham, thank you so much for your time.

Graham: Thank you, Kevin. Cheers.

Avoiding bidding wars – Justin Nickerson

Kevin: I’m joined now by Auctioneer of the Year for Australasia, the best auctioneer in Australia and New Zealand as judged by the various institutes, Justin Nickerson. I’m keen to know from Justin about bidding wars, how do you avoid them, but more particularly, how successful are auctions nowadays? Are we finding more selling before the day of auction?

Justin: Yes, at the moment, we’re actually finding it’s a quite high percentage of things that sell prior. You generally find that in a changing market where the market is either going up or going down. That’s when you sell a lot more prior. At the moment, we’re experiencing a lot of situations where sellers don’t really want to risk what’s on the table prior to auction.

Kevin: When you say the sellers don’t want a risk, in other words, they’re not confident that those people would go to auction and bid?

Justin: I think they’re not confident that their result will be improved on auction day. The agent’s advice obviously plays a big part in this, but in a lot of cases, an agent is probably saying “Look, we found our buyer. They’re extending themselves to try to buy prior to auction. If we take them to auction and they feel that maybe the competition levels aren’t there, they only way they’ll go as backwards. They won’t feel the confidence that they’re going to auction and then get pushed by somebody else.”

Kevin: This highlights for me a question, and you may not even want to answer this, but in terms of the skill of the agent, surely, a skilled auction agent would want to go to auction.

Justin: In most cases. Look, in the training we do, we say you never try to sell things prior, but it happens as a by-product from time to time. But generally, the really good agents will recognize in the last four to five days out from auction, if they only have one buyer or they have one buyer who might have cleared their way out from the rest of the buyers, they’re probably a pretty good candidate that you might take that one and sell it prior.

But we’ve always advocate that should never be your first port of call. Your first port of call should always be going through to auction day, but from time to time the right situation might pop up where you do sell them prior.

Kevin: Under competition, that’s when you get the opportunity to get a premium price or a price that you might not get under other circumstances. You lose that opportunity if you’re going to negotiate with one buyer prior to auction, surely.

Justin: Absolutely. We always say the two ingredients you need to get the best price are an emotional buyer and competition, and you do lose competition. You might have perceived competition, but you don’t have real competition if you don’t go through to auction day.

Kevin: Because quite often even with private trading, this is where there is no auction or tender involved, you could have competitive offers. That’s when you see it’s almost like a silent auction then, when you have two people competing against each other.

Justin: We had two yesterday, Kevin. We had registered bidders there who just wouldn’t partake, multiple registered bidders who just didn’t want to engage. Then you pass the property in, and straight away, they’re behind closed doors and filling out their offers immediately after. It does become almost like an auction after the auction, but you lose that transparency as a buyer of actually seeing where your competition is at.

Kevin: Also, the seller loses the opportunity to get an unconditional contract, because a sale under the hammer is cash unconditional – it must settle.

Justin: Yes, absolutely right. Although in some cases, post-auction offers can be cash unconditional. You just think for that buyer’s perspective, if you just put your foot forward, you would have made a better chance to do it while the auction is ongoing, but they feel more comfortable going behind closed doors and filling out a bit of paper.

Kevin: Was the outcome for the seller in that situation – don’t talk figures – was the outcome acceptable? Did they actually achieve what they would have hoped for under bidding conditions?

Justin: Yes, if they had bid it, they would have bought it, maybe even a little bit less. Without going into figures, the reserve price that was set was actually less than the figure it sold for after in that multiple offer situation. Who knows how it would have unfolded if they actually had the courage?

Kevin: Selling before auction, too, also opens the possibility that the buyers may want to put some conditions on the contract. That’s always a difficult situation. The figure might be acceptable or even better than acceptable, yet it will have a condition with it. What do you do? Do you take the risk that it’s going all the way through, or do you say no, that’s not acceptable, we’re going to go all the way to auction?

Justin: At the risk of sounding like I’m sitting on the fence, it is very much a case-by-case basis, I think.

Kevin: Of course, it is.

Justin: We always say, when you’re negotiating with a buyer, you have to get the buyer to understand that there are two things in play. The first one is the price and the second one is actually the risk factor that goes into it. Sometimes you actually have to compensate the seller for the risk of property not going to auction or for the risk of the terms being not as favorable. That obviously feeds into things as well.

Kevin: When you do go to auction, how do you avoid a bidding war? Is that possible?

Justin: If it’s a really desirable property, probably not, but I think a lot of buyers take a wait and see approach, which is the wrong approach, because on the day you want to be looking as confident and as comfortable as you can to intimidate the other buyers. If you can start bidding, even if you bid quickly, it just sends a message to the other buyers saying “I’m here to buy the property,” which is how you want to present yourself.

Kevin: What should be the structure for someone who doesn’t want to get caught up in that kind of situation?

Justin: Open up at a reasonable figure. The lower that open the auction, the more that you give confidence to the other people who might be there just to see what happens, whereas if you come in at a more aggressive level, then it certainly puts you in a better position to intimidate the rest of the buyers.

The reports you can rely on – Kylie Davis

Kevin: I was startled to see the other day that nearly one in every two buyers – that’s 50% of buyers – looking for a new home these days are currently armed with a property report, and increasingly bank and mortgage brokers are providing their clients with property valuation data to help them get buyer-ready. You might have seen those ads on television where some of the major banks are actually advocating that you get these reports.

Just how reliable are they? It’s a question I’ve asked quite often. I’m going to ask that question now of someone who should know and does know. Kylie Davis is the head of content and property services marketing at CoreLogic, and she also heads up the CoreLogic reports store.

How accurate are these reports, because obviously as we just heard, about 50% of buyers are relying on them, Kylie?

Kylie: They’re a great way to do research about the market and to be prepared for what you’re about to go through as a property buyer. They are certainly more reliable than just asking friends or family what they think the market is doing, because they give you really deep-dive insights into the individual property and can provide you with some really valuable information.

That said, they’re not the price of the property when it comes to a sale situation, and the value in them is not cast in stone. It’s based on algorithms that are extrapolating what a property is worth based on similar properties around it. And that data can change on a weekly basis as more sales and more information comes into the system.

The best way to go about it is to definitely look at a report to make sure that your information is based in data and fact, not just enough opinion, and to use that report to back up or to question or put a contrast to what the real estate agent has told you, but then you have to assess what’s happening in the sales situation.

If you’re the only buyer there, then yes, what you’re seeing in the report is very probably a fair and reasonable price for that property, but if you’re not the only buyer, if it is a lot of competition for that property, then the valuation you see in the report is probably a starting price as to where bidding is going to start.

Kevin: It’s a pretty important point, I think, and that is that these reports should be treated as a guide; there are more definitive ways to work out what you are prepared to pay for it. And as a buyer, that’s what value is; it’s what a willing buyer is prepared to pay, Kylie.

Kylie: Yes. And I think that’s why the auction systems is so popular in some states, because a property is worth what someone is prepared to pay for it, where the market is prepared to go, and an auction lets you see where the market sits really quickly.

Where we see people getting disappointed with property reports is where they feel or believe that that report is the top amount that they should expect to pay. And that’s not realistic. It really is a guide to help you understand “Can I afford a property in this price range, or should I be looking at up or down at other properties higher or lower than what this is coming out?”

If you’re turning up to an auction thinking “If it goes for this much, we’re out,” it’s probably a little bit too high for where your budget is at.

Kevin: I guess if a property sells for more than more than the report states, because there is a lot of interest and strong bidding, it doesn’t necessarily mean that those people have paid too much for it or even that the agent lied; it’s just that they’re market forces. That’s how it works, Kylie, isn’t it?

Kylie: Absolutely. If you have competition for a property, then the value of the property will be the money that the person who has the most is prepared to pay for it. So, just because a report has been run on it, it doesn’t mean that the price that’s being quoted has been cast in stone, and it certainly doesn’t mean that the agent had under quoted it.

Kevin: Good points. Kylie Davis, head of content and property services marketing at CoreLogic. Kylie, thank you for your time. We’ll catch you again soon.